Duty on destroyed waste from processed inputs rejected where unusable residue was lawfully burned after intimation.

Waste generated during processing of duty-paid, credit-availed inputs and lawfully destroyed after intimation to the department was not liable to duty, interest or penalty. Rule 57F(4) permitted destruction of unusable waste arising from such processing, and the fact that two small test clearances had earlier been made on payment of duty did not change the character of the material as waste. On those facts, the demand and penalty were set aside in favour of the assessee.

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Issues: Whether waste generated during processing of duty-paid inputs and destroyed by burning after intimation to the Department could be subjected to duty, interest and penalty.

Analysis: Rule 57F(4) permitted destruction of waste arising from processing of inputs on which credit had been taken. The waste in question was admittedly of no use and had been destroyed after due intimation. The fact that two small test clearances had earlier been made on payment of duty did not alter the character of the material as waste. In these circumstances, confirmation of duty, interest and penalty was not sustainable.

Conclusion: The issue was decided in favour of the assessee and the demand as well as the penalty were set aside.

Final Conclusion: The appeal succeeded because the impugned waste fell within the rule permitting destruction of waste generated from processed inputs.

Ratio Decidendi: Waste generated from processing of credit-availed inputs, when lawfully destroyed after intimation and found to be unusable, is not liable to duty merely because limited test clearances were earlier made on payment of duty.

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